Sunday, September 30, 2012

Home Price Drop of 30% Possible for 2010

First American CoreLogic has released its latest residential real estate analysis here. Three important graphs from the report follow in this discussion.

Distressed Home Sales Increased in January

The first graph shows that distressed home sales have increased to 29% of all sales. This is high but less than a year ago.


Note the systematic increase in short sales over the past year. The volume of shorts sales is expected to be increasing further in 2010. The volume of REO sales is also likely to rise. I have estimated that REO (real estate owned) bank properties on the market in 2010 will be about 33% more in number than in 2009. If sales reflect the same increase then total sales will have to increase by 1/3 in 2010 to keep the ratio of distressed sales around 30%.

Distressed Sales Likely to Increase Share of Market in 2010

The previous discussion means the total sales in 2010 will need to rise to about 8 million, up from about 6 million in 2009. That increase is problematic. For example, it was recently pointed out that an increase of that magnitude in new home sales would require a dramatic change of trend. So most of the increase would have to come from existing home sales and these recently have been trending down.

However, pending home sales were up February, possibly signaling a three month sales volume rally into the April 30 deadline for the latest home purchase tax credit program. Whether this will be enough to put a dent in the 2 million increase in home sales needed for 2010 remains to be seen. The year over year increase in pending home sales in February was 17.6%. If this could be maintained for the balance of 2010 we would only have 1/2 of the sales increase needed to maintain distressed sales at 30%.

If 2010 home sales were to increase by 17% for 2010 over 2009 and my estimates for distressed sales are realized, approximately 35% of home sales in 2010 would be distressed properties. This would produce new highs for the graph above.

Prices Could Fall About 30% from January

The reason the proportion of sales that are distressed is important is revealed in the second graph from First American CoreLogic:



Increasing the share of market for distressed sales to 35% implies an average sales price about 30% below January. (Note: Although not specified by First American CoreLogic, the average sales prices are very close to data publishedby the NAR (National Association of Realtors) data base.)

The Discount for Distressed Sales is Increasing

After dropping from a discount of about 45% three years ago to a low just above 20% in 3Q/2008, the discount for distressed sales is now averaging over 30% for the past 12 months. The trend appears to be upward. See the following graph.



If the trend to higher discount were to continue throughout 2010, the 30% estimated average price decline from January could be too small.

The wild card in these estimates is a possible shift to more sales at higher price points. If the nearly dead market for higher priced homes improves, the average price could be higher than projected. On the other hand, if upper market foreclosures and short sales increase, the discounts for distressed sales could be increased, depressing the discount more than projected.

The two wild cards would act in opposing directions on average home prices. We will have to monitor the market to see if one of the two becomes more important than the other in affecting the average home price.

Disclosure: No stocks mentioned.

Make Money in Low-P/E Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect stocks with low P/E ratios to do well as they gradually rise in value, approaching more reasonable P/E levels, the Russell Low P/E ETF (NYSE: LWPE  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Low P/E ETF's expense ratio -- its annual fee -- is a relatively low 0.37%.

This ETF has performed... well, it's really too soon to say, as it only has a few months under its belt.

Note that the ETF is not only very young, but also very small. Thus, if you're thinking of buying in, make sure you don't get whacked by a wide spread. Alternatively, you might just add the ETF to your watchlist for future consideration, or peek into its holdings for some investment ideas.

What's in it?
Several of this ETF's components have posted solid gains over the past year. US Bancorp (NYSE: USB  ) , for example, gained about 7%. It recently reported revenue up 5% and profits up 40%, and from its Minneapolis home, it's avoided some of the ire that Wall Street banks like Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) have earned in recent years.

Procter & Gamble (NYSE: PG  ) , up 8%, has joined some of its peers in reducing prices in the face of our recent recession and in introducing new low-priced offerings.

Other companies haven't done quite as well but could have a positive effect on the ETF's returns in the years to come. General Electric (NYSE: GE  ) , with P/E ratios below the overall market and its own five-year average, rose just 1% over the past year. But it holds much promise, with a variety of established, growing business lines, as well as newer initiatives such as solar power.

Hewlett-Packard (NYSE: HPQ  ) , down about 34%, has disappointed many investors with its board of directors' behavior, and some are not excited about new CEO Meg Whitman. But its valuation is nevertheless compelling. Indeed, my colleague Anand Chokkavelu listed it as one of the market's 10 cheapest stocks.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Learn about the best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these 10 Stocks for Your Retirement Portfolio.

Top Stocks For 2011-12-2-19

EXOU, Exousia Advanced Materials Inc, EXOU.OB

Dr Stock Pick HOT News & Alerts!

“Exousia to be Cash Flow Positive in China by the end of July, 2009″

 

Thursday July 16, 2009

DrStockPick Stock Report!

EXOU, Exousia Advanced Materials Inc, EXOU.OB

Advanced Materials Help Small Businesses Keep On Truckin�

Using improved manufacturing materials is a good way for companies to help improve their bottom lines. This is especially true of the trucking and maritime industries, where vehicle and machinery weight directly impacts fuel expenditures.

�Reducing the weight of trucks by just 10% translates into potential savings of about $37 billion each year,� says Wayne Rodrigue, Chairman & Chief Executive Officer of Texas-based Exousia Advanced Materials. �If we are able to make truck bodies and cargo boxes lighter, our economy will experience enormous freight-load savings along with huge reductions in fuel consumption.�

Exousia to be Cash Flow Positive in China by the end of July, 2009

Exousia Advanced Materials, Inc. (OTC Bulletin Board: EXOU), a manufacturer of advanced industrial coatings for worldwide infrastructure applications and engineered composites for eco-friendly wood substitutes, announced recently that the company’s wholly owned foreign entity (WOFE), Tianjin Exousia Advanced Materials Company Ltd., expects to be cash flow positive in China by the end of July, 2009.

“Based on the cumulative effect of the additional orders from China United Engineering Corporation, as recently announced, and predicated upon servicing the pending orders for our PowerShield brand coatings from Bohai Shipbuilding and other China based customers, we expect that Exousia will be cash flow positive in China by the end of this month,” explained Mr. Bob Roddie, Exousia’s Senior Vice President and CFO

“We have kept operating costs low while building a solid infrastructure for significant growth. Keeping our overhead under control while securing business relationships with these major Chinese companies has allowed us to achieve this milestone quickly,” continued Mr. Roddie. “We are excited to see our efforts materialize in a substantive way.”

“While it has taken a little longer than we originally planned, we have successfully navigated the company towards increasing revenues that will result in our achieving a positive cash flow from China operations in the very near future,” stated Exousia CEO, J. Wayne Rodrigue.

Keep a close eye on EXOU today, do your homework, and like always BE READY for the ACTION!

6 Chinese Stocks Undervalued By Levered Free Cash Flows

In the never-ending search for potentially undervalued stocks, one indicator is the ratio levered free cash flow/enterprise value. Companies with higher ratios appear more undervalued relative to their levered free cash flows.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm’s value from all ownership sources: market cap, outstanding debt, and preferred shares. From this value we subtract cash holdings because, in the event of a takeover, that cash would be used towards the takeover price.

We ran a screen on US-traded stocks of companies based in China for those with relatively high ratios of levered free cash flow/enterprise value, possibly indicating that they are undervalued.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Your browser does not support iframes.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think the market is undervaluing these companies? Use this list as a starting point for your own analysis.

List sorted by levered free cash flow/enterprise value.

1. AsiaInfo-Linkage, Inc. (ASIA): Provides telecommunications software solutions and information technology (IT) products and services to telecommunications carriers and other enterprises in the People's Republic of China. Market cap of $494.23M. Levered free cash flow/enterprise value at 18.96% (levered free cash flow at $47.75M and enterprise value at $251.80M). The stock is a short squeeze candidate, with a short float at 25.47% (equivalent to 10.33 days of average volume). It's been a rough couple of days for the stock, losing 18.7% over the last week.

2. Sohu.com Inc. (SOHU): Engages in the brand advertising, online gaming, sponsored search, and wireless businesses in China. Market cap of $1.78B. Levered free cash flow/enterprise value at 16.92% (levered free cash flow at $164.86M and enterprise value at $974.09M). It's been a rough couple of days for the stock, losing 6.77% over the last week.

3. Guangshen Railway Co. Ltd. (GSH): Provides passenger and freight transportation services on the Shenzhen-Guangzhou-Pingshi railway in the People's Republic of China. Market cap of $2.41B. Levered free cash flow/enterprise value at 16.18% (levered free cash flow at $346.21M and enterprise value at $2.14B). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.07%, current ratio at 1.8, and quick ratio at 1.71. The stock has lost 13.73% over the last year.

4. China XD Plastics Company Ltd. (CXDC): Rubber & Plastics Industry. Market cap of $240.03M. Levered free cash flow/enterprise value at 15.69% (levered free cash flow at $17.90M and enterprise value at $114.05M). The stock has lost 0.98% over the last year.

5. China Hydroelectric Corporation (CHC): Engages in the acquisition, ownership, development, construction, operation, and financing of hydroelectric power projects in the People's Republic of China. Market cap of $53.99M. Levered free cash flow/enterprise value at 13.34% (levered free cash flow at $61.73M and enterprise value at $462.58M). It's been a rough couple of days for the stock, losing 21.26% over the last week.

6. China Eastern Airlines Corp. Ltd. (CEA): Operates in civil aviation industry. Market cap of $3.87B. Levered free cash flow/enterprise value at 12.35% (levered free cash flow at $758.04M and enterprise value at $6.14B). This is a risky stock that is significantly more volatile than the overall market (beta = 2.28). The stock has lost 27.48% over the last year.

*Levered free cash flow and enterprise value data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Time Decay, the Greeks and Options Trading

The clich� says none of us can avoid death and taxes. For option traders there are two things that are certain: Death and theta. The smart option trader must use theta wisely to be a success.

Time Decay

Theta is a measure of the rate of decline in the value of an option due to the passage of time, according to Investopedia. As the amount of time until expiration decreases, so does the value of the option, assuming all other pricing factors are held constant. This is intuitive when one considers that options with less time until expiration have less practical use to a trader. Therefore, as each day passes, the option has less use, and consequently less value.

While this is a detriment to option buyers, it is a bona fide benefit to option sellers. Though the short option player retains the risk of volatility (in terms of gamma and vega) time always helps.

Theta Optimization

All thetas were not created equal. First, shorter-term at-the-money (ATM) options have higher option thetas than their longer-term counterparts. Traders looking to squeeze the most juice out of their options find it in these shorter-term plays.

Next, ATM options have a higher theta than in-the-money (ITM) options or out-of-the-money (OTM) options. At-the-moneys are meatier in terms of time value, but that also means they must lose value at a faster rate.

Word to the Wise

While it seems obvious to sell the shortest-term ATM option to eke out the most theta, the risks can increase with these options as well. Short-term ATMs also have the highest gamma. That means stock volatility has more of an adverse effect on these options than their alternatives. Plus, selling ATMs provides less of a buffer than out-of-the-money options.

This article originally appeared on Traders Reserve.

For more information contact dan@markettaker.com or visit http://markettaker.com.

Author and options educator Dan Passarelli is the founder of Market Taker Mentoring LLC. Dan has more than 17 years’ experience in the options industry and has worked as both a floor trader and an options instructor.


Trading Ideas: Catching the Risk Mood Early in the Day

The very first theme I try to identify when I power up my computer in the morning is whether global investors are risk-seeking, risk-avoidant, or trading a mixed risk picture. This generally corresponds to whether those investors and traders are positioning themselves for global growth/expansion or for economic weakness/contraction.

Risk-seeking themes show up as:

* Buying commodities, such as oil and copper;

* Buying the currencies of growing economies (and economies exposed to emerging economies) vs. USD;

* Selling U.S. Treasuries (rising bond yields);

* Buying growth oriented stock sectors (small caps, tech) vs. blue chip indexes;

* Buying stocks from emerging markets vs. U.S.;

* Buying speculative credit vs. Treasury debt.

Risk-avoidant themes typically embody the reverse. When we don't see risk-related assets moving in unison, often we get a range, consolidation trade in which assets are reallocated within markets and sectors.

Catching the mood of large investors early in the trading day can often help traders exploit these themes on a day timeframe. It also can help traders avoid getting run over by fighting the intermarket tides.

Jobless rates fall in 29 states

NEW YORK (CNNMoney) -- Unemployment fell in 29 states in February and rose in only eight, the government reported Friday, in another sign of broad improvement in the U.S. labor market.

The improvement means there are only three states with unemployment above the 10% mark -- Nevada with a 12.3% unemployment rate, Rhode Island, which has 11% unemployment, and California, where unemployment stood at 10.9%.

North Carolina and Mississippi dropped out of the states with double-digit unemployment.

As many as 19 states suffered 10% or more unemployment as a result of the recent recession. As recently as last September there had been 10 states with a jobless rate of 10% or more.

Despite suffering from the nation's highest unemployment rate, Nevada did enjoy one of the biggest improvements in the month, as the 0.4 percentage point decline trailed only the 0.5 point improvement in Mississippi.

The overall national unemployment rate was 8.3% in February, as government figures show employers adding almost 250,000 jobs on average over each of the last three months. Friday's report showed that the number of jobs increased in 42 different states in February.

There are now more states with unemployment rates under 5%, widely considered to be full-employment, than states above 10%. But the four states with low unemployment -- North Dakota at 3.1%, Nebraska at 4%, South Dakota at 4.3%, and Vermont at 4.1%, are among the smallest in population.

I have jobs but no one wants them

Only one state -- New York -- has not had a drop in unemployment over the course of the last year. A 0.8 percentage point jump in unemployment in New York City in the face of Wall Street layoffs lifted unemployment statewide by 0.4 points to 8.5%.

But there have been some notable improvements in unemployment in many parts of the country, as the jobless rate has fallen by a percentage point or more in the last year in 17 different states.

The 100 best companies to work for

Michigan has achieved the greatest improvement, a 1.9 point drop to 8.8%, driven by a rebound in hiring in the auto industry. Nevada's rate has fallen 1.3 points and California by 1.1 points, leaving only Rhode Island as a high unemployment state that has not enjoyed significant improvement. 

Saturday, September 29, 2012

Should You Eat Up Diet Stocks?

I believe the world’s most hated activity is dieting. I also believe that it is the single most unsuccessful New Year’s resolution in the history of mankind. And let’s face it, dieting stinks. Who doesn’t want to stuff their face, especially with ice cream? The good news is that if you can’t stick to a diet, at least you can profit from other people’s failures in the form of dieting stocks.

The dirty little secret of the diet industry is that diets are designed to fail. This is great news for diet companies. They get you to keep coming back to try again to quit your bad eating habits. They’re complicated, they depend on strict adherence, and worst of all, they deprive. Human beings don’t do well with deprivation. How many people do you know who have dieted, lost weight, and kept the weight off? However, if you are a diet company, and your message is sufficiently different from that of your competitors and you have a great brand presence, you have a chance to rake in cash.

So are any diet stocks worth buying?

The biggest brand name is, of course, Weight Watchers International (NYSE:WTW). The company has been on a tear of late. Even dieters, apparently, threw in the towel during the financial crisis and withheld their discretionary income from Weight Watchers’ various fee-based products. FY 2009 net income fell 15% over the previous year, but then popped up 10% in 2010, and through only three quarters of 2011 net income was up a whopping 25%, with Q4 waiting to be reported. With Americans’ obsession with health only becoming more intense, it’s no wonder analysts see 14% annualized growth over the next five years. The company does carry a billion dollars of debt (consider it their “fat”), but with free cash flow of a quarter million every year, that’s not a concern. The company trades at 16x earnings, however, and that makes it fairly priced for the moment.

I’ve always been intrigued by smaller, scrappier companies, and in the diet world, that mantle belongs to Medifast (NYSE:MED). You might be surprised to learn that the company has been around for 30 years and has taken the slow, methodical approach to building its brand. Unlike Weight Watchers, Medifast grew its earnings during the financial crisis. The company is slated to grow 17% annually. Best of all, it has only $4 million in debt while generating modest free cash flow of around $15 million each year. The stock, however, trades at only 10x earnings, giving it a PEG ratio of 0.65 — well within value territory. I think Medifast is a great small-cap value play here.

Herbalife (NYSE:HLF) is also faring quite well. It’s even larger in market cap than Weight Watchers at this point, and annualized growth is pegged at 14%. Like its larger rival, it got tagged in 2009 but roared back in 2010, with a 45% net income jump. At the moment, the company has already matched its 2010 earnings through three quarters, so Q4 will make it another year of growth — possibly as high as 30%. �With more cash than debt, and free cash flow last year of over $300 million, Herbalife is on solid ground. �It also looks fairly priced, however, at around 16x earnings.

Of course, you’ll want to dig into financial reports and check into things like inventory. If inventory of raw materials is on the rise, that’s a good sign that demand remains high. If inventory of finished goods is rising at a significantly higher rate than revenue, that may suggest demand is slipping.

Lawrence Meyers does not own shares of any company mentioned.

AT&T Ends $39 Billion T-Mobile Bid (Update 1)

AT&T(T) is ending its $39 billion bid for T-Mobile after increased antitrust scrutiny made the deal untenable. In a Monday statement, the company also announced it would take a $4 billion charge related to a breakup fee in the fourth quarter of 2011. Additionally, AT&T will enter a "mutually beneficial roaming agreement" with T-Mobile owner Deutsche Telekom.AT&T cited objections to the by both the U.S. Department of Justice and the Federal Communications Commission as the reason for its cancellation to the merger, which would have been the biggest acquisition in 2011. The company's shares fell less than 1%, to $28.54, in after-hours tradingIn dropping its bid, AT&T maintained its perspective that the deal was pro-competitive and that it would have long-term benefits for wireless consumers. Calling the U.S. wireless market "one of the most fiercely competitive industries in the world," AT&T said that its proposed combination with T-Mobile would have addressed a spectrum shortage as an increasing number of mobile consumers use high-data load smartphones.AT&T Chief Executive Randall Stephenson said that the company will continue to invest in adding wireless spectrum in spite of the setback. "To meet the needs of our customers, we will continue to invest," Stephenson said."The mobile Internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces," he added. The proposed deal would have combined the second and fourth wireless companies, creating the leading U.S. wireless provider surpassing Verizon(VZ) in size and customers.For more on social media, see our portfolio of 10 new dividend aristocrats for 2012 for more on AT&T.For AT&T, its next immediate step in bolstering wireless service is a $1.93 billion purchase of wireless spectrum from Qualcomm(QCOM) announced in December 2010. Monday, AT&T urged regulators to approve the spectrum purchase, which is currently pending before the FCC.As part of the deal struck in March, AT&T agreed to pay T-Mobile $3 billion in cash and an additional $3 billion in spectrum assets and roaming agreements if the merger were to fall through.When announcing the deal, AT&T also kept open the possibility of entering divestitures to remedy antitrust concerns. According to the deal terms, if AT&T were to divest more than $8 billion in T-Mobile assets, it could renegotiate the merger price. After previously reporting that AT&T was in talks to divest assets to Leap Wireless(LEAP), Dish Network(DISH) and MetroPCS(PCS), the Wall Street Journal reported on Monday that asset sale talks had "gone cold."Without a plan for divestitures, the deal became increasingly unlikely and lead to Monday's cancellation. In previous reports, antitrust experts told TheStreet that AT&T would potentially have to build a wireless competitor akin to T-Mobile, if the deal were to pass.

In August, the Department of Justice blocked the deal on antitrust grounds and in November, the FCC also moved to challenge the merger in courts. In December, AT&T withdrew its merger application with the FCC and was preparing for a February hearing to contest the DoJ's antitrust suit, until withdrawing its bid on Monday.

In October, AT&T wrote a letter to the FCC stating that the deal could preserve over 20,000 call-center jobs in the United States and return another 5,000 jobs from overseas. Throughout the merger process, AT&T stated that the combination would put its service within reach of rural communities and bolster its 4G network coverage, making it better equipped to serve the data needs of consumers using smartphones like Apple's(AAPL) iPhone.The deal would have also added T-Mobile's 33.7 million customers to AT&T's 100.7 million subscribers, making it pass Verizon Wireless as the largest wireless carrier, according to Bloomberg reports.For competitors like Sprint(S), who objected to the merger, as well as Verizon, the merger may be welcome news. Sprint, the wireless industry third with a waning market share and its partner Clearwire(CLWR) saw shares rise 5% in after-hours trading.Content on this page requires a newer version of Adobe Flash Player.Sprint wrote of AT&T's decision to end its merger attempt with T-Mobile, "This is the right decision for consumers, competition and innovation in the wireless industry," in a Monday press statement. Meanwhile, as AT&T's spectrum purchases remain up in the air, it's competitor Verizon has picked up spectrum in multiple recent deals with cable companies. Earlier in December, Verizon cut a $3.6 billion deal to pick up spectrum assets from Comcast(CMCSA), Time Warner Cable (TWC) and Bright House Networks, in addition to marketing partnerships. Last Friday, Verizon also bought $315 million of spectrum assets from Cox Communications.As it looks at possible alternative deals to a T-Mobile merger, AT&T will continue to pursue its Qualcomm spectrum purchase and its 4G LTE deployment, as it tries to catch up with Verizon. "Over the past four years we have invested more in our networks than any other U.S. company," said CEO Stephenson in a statement. >To order reprints of this article, click here: Reprints

Can Dell Follow H-P’s Lead? (HPQ, INTC, DELL, MSFT, IBM)

In what might have been an entirely predictable earnings report last night, Hewlett-Packard (HPQ) reported that fiscal 2010 first-quarter revenue increased by 8% to $31.2 billion and diluted EPS of $0.96, up from EPS of $0.75 in the same period a year ago. Excluding items, HP’s EPS reached $1.10, beating average estimates of $1.06. Revenue also beat a forecast of $30 billion.

When Intel Corp. (INTC) reported its fourth-quarter earnings a month ago, expectations were set for both H-P and Dell Inc. (DELL) to follow. H-P has done its part, and Dell is reporting its earnings after the market closes today. That is not likely to be as upbeat.

Dell has lost market share while H-P has gained. In fact, according to IDC, Dell is now third in share, behind H-P and Acer.

Fourth-quarter 2009 PC sales were up 45% compared with the same period in 2008, and for the full year, 2009 saw demand for PCs grow by 24% year-over-year.

H-P’s PC division posted a year-over-year revenue gain of 20% to $10.6 billion, with a good balance between notebook gains (up 25%) and desktop gains (up 16%). The introduction of Microsoft’s (MSFT) Windows 7 operating system, which has shaken loose some consumer spending for new computer systems.

The enterprise market has yet to fall in line behind Windows 7, but that is expected to happen in the second half of this year. That’s especially good news for H-P because it posted an 11% gain in server sales in the quarter.

Dell’s commercial sales account for about 80% of the company’s revenue, compared with about 16% of H-P’s revenue. Taken together with the slow adoption of Windows 7 in the enterprise market, that would indicate that the December quarter will not be terribly strong for Dell.

In the services area, Dell’s service business is nowhere, compared with H-P’s. H-P lost a bit on services last quarter, but that was mainly a result of lowering its prices in order to gain share. H-P is taking on IBM Corp. (IBM) in the services business, and not Dell. That actually works to Dell’s benefit, but it’s not enough to change the calculus.

H-P is gaining PC market share and Dell is losing share. H-P is increasing its revenues in virtually every division and Dell is not.

Dell is expected to report EPS of $0.27 on revenue of $13.85 billion. Both would be an increase from the year ago quarter. Even if Dell hits those numbers, the impact will certainly be muted.

Tell us what you think here.

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What the End of Savings Account Interest Means to Me as a Parent


I often have a hard time explaining to my kids why they should put some of their money in the bank.

My 9-year-old daughter -- the crafty genius of the family, really -- had me at one point when she asked how much she'd be paid for trusting the bank with her cash. The honest answer is that she'd get paid basically nothing.

That naturally led to her asking what the point was in putting her money in the bank, making it harder to get to, especially when she isn't already a spendthrift.

My answer was essentially what it had to be: because putting money away for later is a good habit. Rates will rise at some point and she'll be paid more. For now, let's just build the habit, I argued.

"But honey, you'll earn a whole 9¢ in interest!"

Let's be clear that I'm not talking about college savings in this article. My wife and I sock away some money in 529 accounts for each of our kids whenever we can. Instead, I'm talking about a savings account my daughter owns: a mechanism designed to help her save for stuff she'd like to have.

Therein lies the problem. Record-low interest rates make for laughable returns for the average savings account: The very best savings deal published by Bankrate (RATE) offered just 1.05% for balances above $25,000 as of this writing, and just 0.90% for other accounts.

Many big-name banks offer 0.10% or even less. Among the better-known names, American Express (AXP) and Discover Financial (DFS) offer accounts that pay 0.85% and 0.80%, respectively, Bankrate reports.

Banks aren't doing me -- or any parent -- a favor by offering my kids essentially nothing for their cash. Under the best of circumstances, my daughter's $100 would earn her just $0.09 per year -- nowhere near enough to buy anything matters to her or any kid.

But it's worse than that. Bankrate shows that most mortgages now cost about 3% annualized, which means the vast majority of institutions that pay well below 1% on deposits earn 3% or more on the funds they've borrowed to lend to others.



What's the Point?

Banks have a right to make money, of course, so that delta shouldn't surprise me or anyone else. Yet I have a hard time arguing that saving is a wonderful thing to do when I know from experience that there are plenty of other ways to earn more.

It wasn't always this way.

My parents opened a passbook savings account for me when I wasn't much older than my daughter is now. Double-digit interest rates were the norm then, transforming every $100 or so I stored away from income earned as a newspaper carrier into $10 or more for every year that I kept the cash squirreled away.

My problem wasn't a lack of savings options. My problem was that, in spite of the remarkable rates I was being offered, I too often chose to spend on fast food, movies, and comic books. Only one of those (i.e., the comics) still has any meaning or value to me.

I Fear for Her Future

That's why it matters to me that my daughter comes to appreciate savings as a habit now, while she's still young, in order to avoid growing up as a spendthrift who struggles with debt as I have.

Gallery: The Safest Banks You Can Trust

I'm also concerned about external forces. Between deficits, deflation, and the incessant political bickering among politicians who at least partially control the financial future of the United States, I wonder if any of the financial systems that have been in place to support prior generations -- Medicare, Social Security, tuition assistance, etc. -- will even survive to her adulthood.

Paranoia, you say? I suppose that comes with being a parent. But if I'm right that long-held safety nets are in the process of failing, my kids will need to cultivate the savings habit as a means of survival. And I've got to do all I can to help.

My next article for DailyFinance will explore some ideas for helping parents build the savings habit in their kids. Care to contribute? Leave a comment below to share your own struggles, suggestions, and successes.

Related Articles
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  • How Low Interest Rates Could Push College Costs Even Higher


Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool has created a bear call spread position in American Express. Motley Fool newsletter services have recommended writing a covered strangle position in American Express.

Brazilian stocks drop as Chinese growth cools

LOS ANGELES (MarketWatch) � Brazil�s stocks fell Friday, deepening losses for the week following a soft quarterly growth report from the country�s largest trading partner, China.

Brazil�s Ibovespa BR:BVSP �closed 1.5% lower at 62,105.60, and all sectors waded in the red. Finance stocks were off nearly 3%, with Banco Santander Brasil BR:SANB11 �down 5%. Among the heavily weighted steel group, Gerdau GGB �dropped 1.1%, but shares of iron-ore miner Vale VALE �turned higher by 0.1%.

Shares of state-run oil producer Petrobras PBR �sloughed off 1.5%.

Click to Play U.S. week ahead: Banks, retail

The coming week will bring more bank earnings from Citigroup and Bank of America, plus retail sales and data from the Philly Fed. Laura Mandaro reports on Markets Hub. (Photo: Reuters)

The Ibovespa, which has fallen four out of the past five sessions, posted a weekly loss of 2.5%, its fourth consecutive weekly decline.

Investors in Brazilian assets received a downbeat update on quarterly growth in China, an important export market for Brazil. China�s National Bureau of Statistics said the economy expanded at 8.1% in the first quarter, the slowest pace of growth in 11 quarters. The latest rate was below analysts� expectations of 8.3% growth. In the fourth quarter of 2011, the economy expanded by 8.9%.

The first-quarter figures reflected weaker exports and construction activity. See more about China's slower growth in the first quarter.

While some analysts viewed the report as pointing to a gradual slowing, it also spurred worries among investors about lower demand from China for natural resources, such as iron ore supplied by Brazil.

An executive with price provider the Steel Index this week told Dow Jones Newswires that slowing in China hasn�t hit the iron-ore market. Read more about the iron-ore market.

While growth in China decelerated during the first three months of the year, Danske Research noted the country�s leading indicators � such as growth in money supply and credit and steel production � recently have started to improve.

This indicates �that growth should start to improve in the coming quarters. In this light, we also believe that the probability of a hard landing is currently declining, albeit the property market remains a concern,� Danske Research�s senior analyst Flemming Nielsen told clients Friday.

The GDP report didn�t sit well with investors in U.S. equities, with the S&P 500 Index SPX �ending the session down 1.3% at 1,370.26 and the Dow Jones Industrial Average DJIA �lower by 137 points. The major indexes logged their worst week this year. Read about Friday's slide in U.S. stocks.

The slower growth figures from China arrived at a time when the Brazilian government itself is enacting measures to bolster domestic growth.

Barclays Capital said Friday that despite a soft reading on Friday in monthly Brazilian retail sales, data flow �continue to indicate that the worst activity is behind us.�

Brazil�s IBGE statistics agency said the volume of sales in February fell 0.5% from January on a seasonally adjusted basis, which �interrupts a sequence of three months of positive rates,� it said in a statement. Sales in February from the same month a year ago climbed 9.6%.

January�s seasonally adjusted sales growth was upwardly revised to 3.3% from 2.6%.

February�s slowdown in spending �was driven largely by a payback in the same groups that pushed retail sales up in January,� wrote Barclays economist Guilherme Loureiro in a note, citing declines in sales at supermarkets and of food and beverages, as well as a contraction in apparel spending.

�Overall, our view is that February�s weaker reading is a one-off event rather than a trend,� said Loureiro. With �strong stimulus in the pipeline, we continue to see strong domestic demand.�

Barclays held to its first-quarter forecast for real GDP growth of 0.7% on a seasonally adjusted basis, in line with its 2012 projection for expansion of 3.3%. A weekly survey of economists conducted by the central bank indicated they expect, on average, growth of 3.2% this year.

Brazil�s economy expanded 2.7% in 2011, decelerating from 7.5% in 2010.

Retail stocks fell Friday, but in the consumer-discretionary group, shares of consumer-goods seller Hypermarcas BR:HYPE3 �rose 2.5% and apparel company Hering BR:HGTX3 �gained 1%. Tobacco company Souza Cruz BR:CRUZ3 �and brewer AmBev ABV �also outperformed the broader market.

Chile�s IPSA CL:IPSA �lost 0.5% to 4,527.46. The weekly decline was 2.6%, the worst weekly performance since late November.

Argentina�s Merval AR:MERV �slumped 2.4% to 2,502.08 on Friday. It gave up 2.2% for the week, marking the fourth straight weekly fall. Shares of YPF YPF �ended the daily session down 3.3%, remaining under pressure on government-takeover concerns.

In Mexico City, a steep decline in stocks in the final minutes of trading pushed the main IPC equity index MX:IPC �down more than 2%, with the move being investigated by exchange officials, according to reports. A representative for exchange operator Bolsa Mexicana de Valores wasn�t immediately available for comment.

The IPC had been lower by about 0.8% when roughly 15 minutes before the regular session closed, it slid 2.3% at 38,444.01.

Friday, September 28, 2012

Shegkai Innovations Lowers Revenue Guidance

On February 9,2012, Shengkai Innovations (VALV), a leading ceramic valve manufacturer in the People's Republic of China (PRC), announced results for its fiscal year 2012 second quarter and first six months ended December 31, 2011.

Revenue was approximately $10.3 million in second-quarter FY2012 compared with approximately $22.4 million in the second quarter of FY2011.

Revenue from the electric power segment was approximately $2.6 million compared with approximately $16.0 million in the second quarter of FY2011.

Revenue from the petrochemical and chemical segment increased 32.8% year-over-year to approximately $7.1 million.

Revenue from other industries, including the aluminum and metallurgy industries was approximately $0.6 million compared with approximately $1.1 million in the second quarter of FY2011.

I estimated correctly the revenue by segment on my article at January 9, 2012.

My revenue estimates for each industry group for the quarter ended December 31, 2011 are as follows: electric power industry $2 million, petrochemical and chemical industry $7 million and aluminum, metallurgy and others $1 million.

GAAP net income was approximately $1.8 million compared with approximately $14.9 million in the second quarter of FY2011. Based on a greater weighted average number of shares, diluted earnings per share were $0.05 compared with diluted earnings per share of $0.42 in the second quarter of FY2011. During the second quarter, the number of diluted shares was 36,363,979 compared with 35,579,888 diluted shares in the second quarter of FY2011.

Financial Condition

As of December 31, 2011, the company had cash and cash equivalents of approximately $69.0 million ($1.91 per share) and accounts receivable of approximately $6.5 million compared with approximately $59.9 million cash and cash equivalents and $12.6 million of accounts receivable as of June 30, 2011. Total current liabilities as of December 31, 2011, were approximately $4.7 million, compared with approximately $9.6 million as of June 30, 2011. Additionally, the company has no short-term or long-term debts.

Net cash flow provided by operating activities was approximately $7.7 million for the first six months of FY2012 compared with $10.1 million in the first six months of FY2011. The decrease was primarily attributable to the lower adjusted net income.

Business Outlook

In response to the business disruptions and changes in the application of ceramic in the valve industry, Shengkai management has decided to gradually phase out its less profitable domestic market segments including the electric power market and focus on expanding the company's presence in the more profitable domestic and foreign oil and chemical industries where ceramic valve products typically command higher prices than the domestic Chinese market. Successful penetration into the international oil and chemical markets, however, would require the company to obtain various industry-wide certifications, including but not limited to ISO14000 and OHSAS18000 and other firm-specific supplier qualifications, which will take time to go through various application procedures, efforts in new product development and investment in additional or different equipment.

There are less effective working days during the period between January and March due to various holidays such as the New Year and the Spring Festival. In addition, the increase in the average selling price of our products is impacting our domestic sales in the foreseeable future before the new pricing dynamics takes hold. In light of such developments, we expect the total revenue for the quarter ending March 31, 2012 to be approximately $5.5 million. We expect the company to continue to run with positive but significantly reduced cash flow from operations. Such decrease may persist until our marketing and sales efforts to some new customers and projects pay off, and the expansion in the international market picks up meaningfully.

My new revenue estimates for each industry group for the quarter ended March 31, 2012, are as follows: electric power industry $1 million, petrochemical and chemical industry $4 million and aluminum, metallurgy and others $0.5 million.

Conclusion

I still recommend buying this stock under its cash position of $1.91 as long as the company stays profitable. I am disappointed by the company's new revenue guidance but consider it remarkable that the company still expects to be profitable with the significantly reduced revenue expectation.

Disclosure: I am long VALV.

S&P: U.S. credit at risk without debt deal

NEW YORK (CNNMoney) -- Credit rating agency Standard & Poor's said Friday the United States could be in for another credit downgrade by 2014 if Congress doesn't tackle the national debt with a serious plan.

"For such a plan to be credible, we believe it will require broad bipartisan support," the agency said in a statement.

Last summer, S&P stripped the United States of its AAA rating, citing in part the "political brinksmanship" that dominated the political fight over the debt ceiling. That debate, the agency said Friday, "raised some concern about congressional commitment to avoiding default on U.S. government debt."

S&P said it is affirming the country's current AA+ credit rating but that its outlook on the rating remains negative.

Translation: There is at least a one-in-three chance the agency could issue another downgrade within two years.

"We think that recent shifts in ideologies of the two major political parties in the U.S. could raise uncertainties about the government's ability and willingness to sustain public finances consistently over the long term," S&P wrote.

Debt ceiling in play again

The agency said it is not expecting an easy resolution to the fiscal debate after the November elections. A close election could "reduce bipartisanship from its already low level as each side strives to rally support by more clearly distinguishing itself from the other."

S&P stressed that while Congress needs to come up with a debt-reduction plan for the medium term -- meaning over 5 to 10 years -- it needs to be careful about upending the economy in the short-run.

"We believe the fiscal challenges of the U.S. are more structural and recognize that abrupt short-term measures could be self-defeating when domestic demand is weak," S&P said.

Like most observers, S&P assumes that Republicans and Democrats will take steps to avoid the "fiscal cliff" -- the sudden onset of more than $500 billion in scheduled tax increases and spending cuts in 2013.

Specifically, the agency assumes the Bush tax cuts will remain in place "indefinitely," that the Alternative Minimum Tax will be indexed for inflation to prevent millions of non-wealthy tax filers from being hit, and that lawmakers will reverse a scheduled reduction in Medicare physician pay.

Bolstering the U.S. credit rating, S&P noted, is the country's resilient economy, its monetary credibility and the fact that the U.S. dollar remains the world's reserve currency.

The agency assumes that the economy will grow between 2% and 3.5% a year on an inflation-adjusted basis, inflation will be modest and short-term Treasury rates will remain near zero until 2015.

S&P's assessment Friday isn't likely to surprise experts on the U.S. fiscal situation.

"With Congress still deadlocked when it comes to proper fiscal reform, the U.S. has not done enough for S&P to restore the AAA rating. And things have not deteriorated enough to warrant S&P acting on its negative outlook," said Mohamed El-Erian, CEO of investment firm Pimco. 

Buckingham to Offer Turnkey 401(k) Program for Independent Advisors

The Buckingham Family of Financial Services announced Wednesday that it had acquired Advisors Access, a turnkey 401(k) program. Advisors Access will now be offered by BAM Advisor Services. In addition to BAM’s current 125 independent registered investment advisor (RIA) clients, Advisors Access will be offered through other RIAs operating in the 401(k) market.

“BAM has been providing clients opportunities in the qualified space for many years, but we wanted to broaden that offering and expand the turnkey offering in the proposal process,” says Mont Levy (left), CEO of BAM Advisor Services, when asked about the impetus for the deal. “We were aware of Advisors Access and felt like they did all the things we wanted to do, so we approached them and got a dialogue going.”

Levy notes more RIAs are ramping up their 401(k) business in order to build out their comprehensive platforms in the wake of new regulations and fee disclosure rules, specifically with sponsors’ responsibility for fee transparency.

The Advisors Access program provides RIAs the with what Levy describes as key features plan sponsors are seeking as the next evolution of 401(k) plans: advisor-managed portfolios, access to exclusive institutional investments, one-on-one advice, fee transparency, and the fiduciary liability protection of working with both an ERISA 3(21) fiduciary advisor and an ERISA 3(38) investment manager.

Advisors working with Advisors Access receive assistance at every step of the 401(k) process, from marketing to enrollment to the ongoing client-service process. The collateral materials of the program are private-labeled, allowing each advisor to further differentiate their practice and connect their firm with the national brand of Advisors Access.

The Advisors Access program is offered alongside BAM’s platform of RIA support services, which include back-office, technology, fixed income, marketing, compliance and risk management. Like BAM, Advisors Access has an emphasis on passive investing. Screening more than 10,000 active and passive mutual funds when creating and rebalancing portfolios, Advisors Access’s says its screening process continues to find that many of the most effective, lowest cost investments are those which favor a passive strategy.

Advisors Access was acquired from Capital Directions, a fee-only, Registered Investment Advisor with more than $800 million in assets under management. Advisors Access will maintain its name and will continue to be managed by Capital Directions. The terms of the deal were not disclosed. 

In October, The Buckingham Family merged with Wealth Management Consultants, LLC. Currently with over $13 billion in assets under management or administration, The Buckingham Family joined the Focus partnership of independent fiduciary wealth management firms in 2007 with $7.9 billion in assets.

Which Sector ETFs Are Cheap?

Sector rotation strategies have long been popular with investors–especially those who believe they are able to spot relative opportunities in various corners of the market. Sector rotation strategies have the potential to�generate significant alpha, as there are often big differences between performance of various sectors of the economy. Timing movements into strong performers and out of laggards can be a way to generate excess returns relative to a broad-based benchmark.

Though many investors assume that all corners of the market generally move in unison, the reality is quite different. So far in 2012, the Consumer Discretionary SPDR (XLY) has added about 12%. The Energy SPDR (XLE) is down about 4%–a significant gap between two ETFs that both offer exposure to large cap U.S. stocks [sign up for the free ETFdb newsletter].�

Sector ETF PEGs

For investors looking to determine relative opportunities in sectors of the U.S. economy, examining the PEG ratios of the various sector-specific products can be an interesting exercise. PEG ratios, which are calculated by dividing P/E multiples by expected earnings growth rates, take into account both the price of an ETF relative to the underlying stream of earnings as well as the expected growth in earnings of component companies. It’s a quick way to measure how much you’re paying for future earnings, which is considerably more useful than a pure backward-looking approach. Assets with higher expected earnings growth are generally more expensive than those with low growth prospects, and vice versa.

[See 101 ETF Lessons Every Investor Should Learn]�

There are, of course, limitations to using such a metric. For starters, analyst estimates are involved, and we’ve learned that there is considerable room for error when forecasting earnings. Below are the PEG ratios for all nine sector SPDRs, as well as for the broad-based SPY (data as of 5/25/2012):�

TickerSectorForward P/E3-5 Year EPS GrowthPEG
XLKTechnology12.60x13.32%0.95
XLYDiscretionary15.43x15.43%1.00
XLPStaples15.77x8.76%1.80
XLUUtilities14.73x3.87%3.80
XLVHealth Care12.24x9.13%1.34
XLIIndustrials12.65x12.52%1.01
XLFFinancials11.02x10.59%1.04
XLBMaterials12.37x10.70%1.16
XLEEnergy10.22x9.78%1.04
SPYBroad Market12.53x11.08%1.13
Reading The Tea Leaves

Analyzing the PEG ratios above shows some interesting results. Technology stocks seem to be cheap now; XLK’s forward P/E is only slightly higher than the broad market, despite expectations for considerably higher earnings growth. And it certainly appears as if there is a bubble forming in the utilities sector. As markets have tumbled lately, investors have flocked towards the corner of the market known as a relative safe haven and source of attractive and stable dividend yields. As a result utilities stocks are among the most expensive in the current environment, despite offering the least promising growth potential. If stocks are able to bounce back in coming weeks, a long XLK / short XLU trade could have considerable upside [see the High Tech ETFdb Portfolio].�

Consumer discretionary stocks also look appealing with a PEG ratio of about 1x, though it should be noted that this sector has the highest expected earnings growth. If this sector isn’t able to follow through on expectations for annual growth of about 15% in earnings, it could have trouble maintaining such a lofty valuation. �

Greece Vote Pass Starts Large Euro Rally – FXstreet.com

FXstreet.comGreece Vote Pass Starts Large Euro Rally
FXstreet.com
by Easy Forex Team – Easy Forex | View company's profile The Dollar was on the back foot against most risk assets in the market with a sharp reversal of global investor sentiment seeing Stock markets gain 5%+. Better than expected US economic data and …
Greek relief starting to stallBusiness Insider
Forex – Forex Video Technical Update 7.3.2011 � A Look at the Surging EuroForexTV.com
Daily Forex ViewForex Hound
Benzinga -NASDAQ
all 104 news articles »

{forex} – Google News

Asian Stocks Hammered on Continued Tightening Concerns

Continued tightening concerns and diminishing sentiment weighed on Asian stocks overnight. The Nikkei finished lower by 1.8%, Hong Kong closed lower by 2.4% and Shanghai closed lower by 2.4%. Trading Shanghai was thin, but investors are growing increasingly concerned that the market has moved too far too fast and that banks will begin to pull liquidity from the market.

Breadth was very negative in Shanghai’s A shares with 852 declining issues vs just 56 rising issues. Analysts in Shanghai fear the negative trend might not be over. Wu Nan, an analyst at Xiangcai Securities in Shanghai expressed his concerns:

Concern over monetary tightening hurt sentiment, with market liquidity drying up. The index is heading for the next round mark at 3,000 points, although there will be a mild rebound at some point. Few investors are brave enough to buy, with the index below its 125-day moving average for a third session in a row.

Futures in the U.S. are not responding too negatively to the news, however, as we’ve mentioned before – the loss of China in the global economy would almost certainly result in a very dangerous equity market environment. Investors would be wise not to ignore the Chinese market which has actually served as a powerful leading indicator of U.S. equity market performance over the last few years.

VN:F [1.8.1_1037]

Tech Stocks: NCR, AMD lead techs higher

SAN FRANCISCO (MarketWatch) � Shares of NCR Corp. and Advanced Micro Devices were up sharply on Tuesday leading the tech sector to modest gains.

NCR�s NCR �stock jumped 11.4% to close at $21.19 a day after the company reported better-than-expected results.

Click to Play ABC, Univision eye new channel

Details of a new venture being planned by ABC News and Univision -- a new 24-hour cable channel that would broadcast in Spanish.

After slipping early on, the Nasdaq Composite Index COMP �moved up 0.1% to close at 2,904. The chip sector gave the group a lift, as shares of Advanced Micro Devices AMD �, gained 3% to close at $7.13. Micron Technology MU �added 1.9% to close at $7.88.

AMD got a boost from Longbow Research which upgraded the stock to buy from neutral.

Analyst Joanne Feeney cited �improving fundamentals and lower risk,� saying in a note, �AMD has finally cleared the supplier headwinds that constrained its performance in 2011.�

The Philadelphia Semiconductor Index SOX �was up 0.1%.

Also on the rise were shares of Apple Inc. AAPL �which traded up 1.1% to close at $468.83.

Networking giant Cisco Systems CSCO �also bounced back to rise 0.1%, closing at $20.20. Juniper Networks JNPR �added 1.3% to close at $23.02, while JDS Uniphase JDSU �advanced 4.7% to close at $13.25.

In the software sector, Oracle Corp ORCL �was down a fraction, but Microsoft Corp. MSFT �and Adobe Systems ADBE �posted modest gains.

Among Internet stocks, Google Inc. GOOG �and AOL Inc. were each down a fraction, but Yahoo Inc. YHOO , eBay Inc.EBAY �and Amazon.comAMZN � posted slight gains.

Thursday, September 27, 2012

20 High Dividend Stocks With Sustainable Payments

Defensive investors like high dividend yielding stocks and consider them as viable options in especially inflationary environments. We expect high dividend stocks to outperform the 10-year Treasuries over the next 10 years.

On the other hand, high dividend yields are not the only important criteria to be sought in defensive stocks. Defensive investors may also seek sustainable dividend payments from each high dividend yielding stock. Since high dividend yielding companies with lower dividend payout ratio are more likely to continue paying high dividends in the future, we believe conservative investors like to pick such companies when seeking sustainability and inflation protection.

We compiled a list of mega-cap U.S. stocks with low dividend payout ratios and high current dividend yields. The market data are sourced from Fidelity. All companies in this list have market capitalizations above $4 billion, 12-month dividend yields of at least 4% and positive EPS Growth over the last five years.

Dividend Yield

Dividend Payout Ratio in 2010

52-Week Return

AT & T

T

5.59%

73.04%

28.83%

Reynolds American Inc.

RAI

5.58%

73.90%

53.18%

Eli Lilly and Co.

LLY

5.25%

41.35%

13.76%

BCE Inc.

BCE

5.21%

62.72%

31.81%

PPL Corporation

PPL

5.17%

44.73%

11.39%

Exelon Corporation

EXC

5.03%

51.72%

7.78%

SCANA Corporation

SCG

5.01%

63.12%

8.52%

Bristol Myers Squibb Co.

BMY

4.80%

59.26%

13.79%

Entergy Corporation

ETR

4.79%

45.63%

-6.33%

DTE Energy Company

DTE

4.77%

60.56%

7.62%

Bank of Montreal

BMO

4.63%

56.34%

5.09%

Consolidated Edison Inc.

ED

4.55%

68.99%

24.19%

Canadian Imperial Bank of Commerce

CM

4.52%

53.95%

11.71%

Shaw Communications Inc.

SJR

4.41%

68.29%

12.18%

PG&E Corporation

PCG

4.31%

53.22%

2.18%

Alliant Energy Corporation

LNT

4.28%

57.45%

25.65%

CMS Energy Corporation

CMS

4.27%

48.53%

33.21%

Kimberly Clark Corp

KMB

4.23%

56.41%

10.30%

Xcel Energy Inc.

XEL

4.23%

61.88%

19.69%

Dominion Resources

D

4.13%

54.79%

19.14%

AVERAGE

16.68%

All of the 20 large-cap U.S. stocks in our list have dividend payout ratio of less than 75%. In the last 52-week period, the average return of these 20 stocks was 16.68%. Only one stock in this group – ETR – had a loss in the past 12 months, whereas all other stocks except five – EXC, BMO, PCG, DTE and SCG – provided double digit returns in the same period.

The top 10 highest dividend yielding large-cap U.S. stocks with low dividend payout ratios are as follows:

1. AT & T: AT & T is a large telecommunications company providing telephone, internet and TV services. T has a 5.59% dividend yield and returned 28.83% during the past 12 months. T had EPS of $2.3 and a dividend payout ratio of 73.04% in 2010. The stock has a market cap of $182.22B and P/E ratio of 9.10. Phill Gross' Adage Capital has the largest position in T, holding nearly $400M of the stock. Cliff Asness, D.E. Shawand Jim Simons are also among T investors.

2. Reynolds American Inc.: Reynolds American Inc. is a large U.S. tobacco company operating worldwide. RAI has a 5.58% dividend yield and returned 53.18% during the past 12 months. RAI had an EPS of $2.49 and a dividend payout ratio of 73.90% in 2010. The stock has a market cap of $22.16B and P/E ratio of 16.07. Jim Simons, David Winters and Cliff Asness are prominent RAI investors.

3. Eli Lilly and Co.: Eli Lilly and Co. is a large pharmaceutical company operating worldwide. LLY has a 5.25% dividend yield and returned 13.76% during the past 12 months. LLY had an EPS of $4.74 and a dividend payout ratio of 41.35% in 2010. The stock has a market cap of $43.22B and P/E ratio of 8.48. Jim Simons' Renaissance Technologies had more than $200 Million in LLY at the end of March 2011. Ron Gutfleish's Elm Ridge Capital holds the second largest LLY position among 300+ funds we are tracking.

4. BCE Inc.: BCE Inc. is a telecommunications company providing telephone and Internet services primarily in Canada. BCE has a 5.21% dividend yield and returned 31.81% during the past 12 months. BCE had an EPS of $2.79 and a dividend payout ratio of 62.72% in 2010. The stock has a market cap of $29.37B and P/E ratio of 13.87. Louis Navailler had more than $40 Million in BCE.

5. PPL Corporation: PPL Corporation is an energy company providing electricity and natural gas delivery services in the United States and the United Kingdom. PPL has a 5.17% dividend yield and returned 11.39% during the past 12 months. PPL had an EPS of $3.13 and a dividend payout ratio of 44.73% in 2010. The stock has a market cap of $15.63B and P/E ratio of 11.62. Richard Schimel's Diamondback Capital has the largest PPL position among 3004 funds we are tracking. Phill Gross and Steven Cohen are also among PPL investors.

6. Exelon Corporation: Exelon Corporation is an energy company that delivers electricity in the United States. EXC has a 5.03% dividend yield and returned 7.78% during the past 12 months. EXC had an EPS of $4.06 and a dividend payout ratio of 51.72% in 2010. The stock has a market cap of $27.64B and P/E ratio of 11.16. Michael Messner's Seminole Capital and Bruce Kovner's Caxton Associates hold EXC positions in their portfolios.

7. SCANA Corporation: SCANA Corporation is an energy company providing electricity to retail and wholesale customers in the United States. SCG has a 5.01% dividend yield and returned 8.52% during the past 12 months. SCG had an EPS of $3.01 and a dividend payout ratio of 63.12% in 2010. The stock has a market cap of $4.96B and P/E ratio of 13.09. Phill Gross, Lois Bacon, Ken Heebner, Jim Simons and Israel Englander are prominent SCG investors.

8. Bristol Myers Squibb Co.: Bristol Myers Squibb Co. is a global pharmaceutical company. BMY has a 4.80% dividend yield and returned 13.79% during the past 12 months. BMY had an EPS of $2.16 and a dividend payout ratio of 59.26% in 2010. The stock has a market cap of $46.95B and P/E ratio of 14.26. Both Samuel Isaly and Jim Simons (See Renaissance Technologies'largest holdings here) hold more than $100 Million of BMY.

9. Entergy Corporation: Entergy Corporation is an energy company producing and distributing electric power. ETR has a 4.79% dividend yield but lost 6.33% during the past 12 months. ETR had an EPS of $7.1 and a dividend payout ratio of 45.63% in 2010. The stock has a market cap of $12.34B and P/E ratio of 10.04. Glen Russel Dublin's Highbridge Capital, Clint Carlson's Carlson Capital and Cliff Asness' AQR Capital hold the largest positions in ETR among many funds we are tracking.

10. DTE Energy Company: DTE Energy Company is a U.S. company providing electric and gas utility services in the United States. DTE has a 4.77% dividend yield and returned 7.62% during the past 12 months. DTE had an EPS of $3.6 and a dividend payout ratio of 60.56% in 2010. The stock has a market cap of $8.34B and P/E ratio of 14.44. Cliff Asness' AQR Capital had the largest position in DTE at the end of March 2011. Phill Gross' Adage Capital is also among DTE investors.

Disclosure: I am long T, PCG.

Top Stocks For 5/21/2012-7

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CVAT, Cavitation Technologies Inc, CVAT.OB

Cavitation Technologies’ CaviGulation System, a Breakthrough Technology for the Water Purification Industry

Cavitation Technologies, Inc. (OTC Bulletin Board: CVAT) is a “Green-Tech” company, established in 2006 to become a world leader in the development of new cutting edge technologies for the vegetable oil refining, renewable fuel, petroleum, water treatment, wastewater sanitation, food and beverage, and chemical industries.

CVAT announced that the CaviGulation system offers essentially complete disinfection (up 99.999 %) by killing bacteria and viruses. The system is primarily designed for physico-chemical reactions used in water treatment. CaviGulation is a complex process with a multitude of mechanisms operating synergistically to remove pollutants from the water.

The effectiveness of CaviGulation technology is 1000-fold over conventional systems and allows the complete elimination (by complete photo-chemical oxidation) of all micro-organisms (including spores), viruses and protozoa.

As a result of not having access to clean, safe water, millions of people, in developing countries in particular, die every year from a variety of waterborne diseases, sadly the vast majority of who are children. Chemically and/or microbiologically contaminated water kills people. Around the world, humans suffer more from microbiological contamination than they do from chemical contamination. A safe water supply and effective disinfection contributes greatly to our high quality of life and to our overall good health and well-being. We are proud of the fact that the technologies we are developing at CVAT have the potential to address the water and energy concerns we face worldwide.

Over past decades, numerous outbursts of disease affected populations caused by the presence of pathogens of protozoa etiology in potable water have been observed in different regions of our planet. Among these diseases, lambliasis and cryptosporidiosis should be mentioned first of all. The watery diarrhea is the major symptom of these diseases. It is noteworthy that cysts of lamblii and cryptosporidium oocysts possess more pronounced resistance to the action of disinfecting agents such as chlorine and ozone conventionally employed at waterworks as compared with bacteria and viruses. Hence, the transfer of the pathogenic organisms in point most often occurs through the potable water satisfying qualifying standards with respect to coliform bacteria. One of the main reasons behind the pollution of water sources with pathogenic organisms responsible for intestinal protozoa is the discharge of raw or of insufficiently purified waters. Therefore, the investigations directed to the development of effective methods of disinfection of natural waters and sewage relating to lamblia cysts and cryptosporidium oocysts are really topical.

In the course of water treatment by CVAT reactors directly inside the body of the reactor, short-living vapor-gaseous cavities are generated in water. These cavities arrive at a moment of local decompression and then close with a microburst upon the compression of water on microinhomogenieties inside the volume of the unit body with a frequency of several tens kHz. Due to the local sharp changes in pressure and temperature in the treated water, the pathogenic microflora is completely destroyed. In addition, active chemical radicals and hydrogen peroxide are formed. In the course of this process, fungi spores and bacteria serve as the aforementioned microinhomogenieties and thus become treatment targets. Moreover, the action of hydrodynamic cavitation in the volume of a liquid under treatment brings about the process of the volume degassing, that is, the appearance of multiple microscopic air bubbles.

CVAT’s reactor is a mechanical device which operates primarily on the principles of kinetic energy, chemical equilibrium, electro chemical principles and controlled hydrodynamic cavitation. The reactor’s multi chambers create tremendous force that causes molecules to collide in the hyper kinetic zone. The intense zone of energy causes high temperatures and pressures with sufficient energy to affect the equilibrium of chemical equations of molecules. Microorganisms are typically incapable of surviving and mineral bonds in water are broken as they pass through the system. This force of energy destroys the microbial cell. Bacteria are eradicated by the combination of synergic action pressure, vacuum, kinetic impact, electrical field, hydrodynamic cavitation and sonic waves.

More about CVAT at: www.cavitationtechnologies.com

Add CVAT to your Watch List!, do your homework, and like always BE READY for the ACTION!

Analysts warm to Singapore property stocks

Reuters

SYDNEY (MarketWatch) � While some see Singapore�s property market as too hot to handle, several analysts argue there�s still money to be made for the long-sighted equity investor.

For the past three years, the government has taken steps to cool the overheated property market, most recently boosting stamp duty on foreign buyers as the land-strapped island nation fights to fend off investment demand.

Private-home prices eased a modest 0.1% during the first-quarter � but marked the first fall since 2009 � according to the Urban Redevelopment Authority. Sub-sales transactions, an indicator of speculative activity, have fallen significantly.

Click to Play P&G moves personal-care headquarters to Singapore

Procter & Gamble is relocating its global skin, cosmetics and personal-care unit from its Cincinnati headquarters to Singapore, following a decision to base the business in the fast-growing Asia beauty market. Photo: AP.

Efforts to stabilize the market are working, the government says, though demand for housing remains stubbornly high. Strong liquidity and low interest rates helped sales near three-year high in April, setting the stage for more policy intervention.

Capital Economics Asia economist Daniel Martin said the government faces a crucial test to bring down prices over the coming year.

�If prices don�t start to cool in the next year, then we�re going to be in a fairly dangerous situation where there�s risk of a sharp fall,� Martin said.

�My sense is they�ll go a little further and [require] more down payments on mortgages and standard capital requirements on banks � other macro-prudential measures that make it a little more difficult to buy a house,� he said.

Strategists at Daiwa Securities agreed that more intervention is on its way, and consequently they hold a a negative rating on Singaporean real-estate shares, given that any quarterly increase in home prices �could trigger another policy response by the government, negative for property stocks.�

Still, regulatory risk isn�t enough to deter Aberdeen Asset Management from exposure to the Singapore housing market via the stock market.

Though share prices have re-rated this year, portfolio manager Kristy Fong said Aberdeen is �still happy, and positive on our stocks long-term, because property tends to be a reflection of the economy, and we�re generally quite optimistic about the Asian region.�

A move by the nation�s central bank last month to allow the currency to appreciate more quickly sparked a flood of money into the Singapore, according to Capital Economics� Martin, who expects the tide of global investment flows to strengthen.

�Singapore is a fairly safe market, it looks quite attractive [globally]. It�s a country that investors are looking to at the moment and thinking it�s not as risky as others,� he said.

First-quarter growth in the trade-focused nation beat expectations with a 10% jump on the previous quarter, though the government warned that a slowing global economy could frustrate momentum.

Stock picks

A relatively healthy economic outlook coupled with land shortages underpins Aberdeen�s Singapore property-stock outlook. The fund likes firms with solid land assets, and holds heavyweight City Developments Ltd. SG:C09 � CDEVY , as well as smaller names Bukit Sembawang Estates Ltd. SG:B61 �, and Wheelock Properties Singapore Ltd. SG:M35 � WKSGY

Aberdeen�s Fong said City Development has been active in buying land from the government sales and owns a strong portfolio of tracts of low-cost land. Hotel holdings outside of Singapore further boost City�s appeal, she said.

�The hotels give them diversification � these hotel assets are sitting on prime land in places like the U.K. It�s an asset play,� Fong said.

Smaller player Bukit Sembawang offers a solid pipeline of projects and is �very profitable and still trading on the 50% discount to its net-asset value,� she said.

One notable omission from the portfolio is CapitaLand Ltd. SG:C31 CLLDY , Southeast Asia�s biggest developer.

Fong said the firm has a high asset turnover, and its model is based on cycling capital through real-estate investment trusts, while Aberdeen �prefers the traditional developers that buy and sell land.�

Broker CLSA has CaptiaLand under review, while noting the stock is a good proxy to China�s residential and retail sectors, with 41% of its gross asset value attributable to China.

However, CLSA has a buy recommendation on CapitaMall Trust SG:C38U �CPAMF �, supported by its �exposure to a population enjoying rising disposable income and a low unemployment rate.�

All about brain injury claims

When you have been injured because of the negligence of another person then you have the law by your side to hire a solicitor and make personal injury claims. Such accidents can result in horrible injuries and the most terrible of them all is surely the brain injury. If you have suffered this type of injury you have the right to file personal injury claims and also request a rightful compensation

The brain injury is mostly a result of a heavy impact in the head region. Such injuries can actually be the consequence of painful accidents such as motorcycle accidents, car accidents and even slips and trips, assaults and a series of medical conditions. Some of the most common symptoms that you will experience are: loss of motor functions, loss of hearing or loss of sight, depression, traumatic stress and inability of performing everyday activities.

When you have been hurt you have all the rights to file for injury claims compensation. Make sure that you find a very good lawyer that can assist you with the legal procedures and can ask for compensation. The law can be rather complex when we are talking about brain injuries, this is why you need to have a specialist to help you, that can dedicate all his time to this case. This is the only way that they are going to come up with the best brain injury claim. Your lawyer will have to carefully analyze the case and then decide who to press charges against.

Everyone has the right to file for injury claims compensation when they have been hurt. You should find a good lawyer to help you and to take care of the legal procedures for you. The law in case of brain injuries can be rather complex this is why personal injury claims lawyers will have to dedicate a lot of time and effort to assist you. Only with this dedication he/she is going to be able to come up with the best brain injury claim.

It will take some time until you can recover from a brain injury. Therefore you will need both financial and moral support. It is clear that your lifestyle is going to change, therefore don’t hesitate to file personal injury claims and receive what you deserve in matters of compensation.

With the right solicitor from you can win your injury claims no matter what injuries you have suffered.

Wednesday, September 26, 2012

Spending vs. Saving: Good or Bad?

In George Orwell’s brilliant novel Nineteen Eighty-Four, one of the characters, Syme, in discussing the nature of Newspeak, says “It’s a beautiful thing, the destruction of words.” Newspeak was a systematic attempt by the dictators of Oceania, a totalitarian society eerily similar to North Korea, to control thought by eliminating words that gave rise to ideas they disapproved. What Syme and Orwell are talking about is that the destruction of words is the destruction of ideas.

There is a parallel to this in contemporary economic thought. Mainstream economists, Keynesians, Neo-Keynesians, and Neoclassists, would have you believe that what common sense would call “good” is now “bad.” Conversely, “bad” is the new “good.” I don’t mean to suggest that we are heading toward becoming a North Korea. My point is that that the experts seem to abandon common sense, and yet most people instinctively understand that good is good.

Common sense is the crux of Austrian theory economics. Austrians look at how individuals act, not how "economies" or "nations" act or behave. Ludwig von Mises, the greatest Austrian thinker, and in my opinion the greatest economist, entitled his great work, Human Action (not National Action). The Austrian School was referred to by the Germans as the Psychological School because its analysis started with individual action and how those actions would either attain or fail to attain the goals sought by individuals. In other words, it involves a lot of the "common sense" that guides human behavior most of the time. It is comforting to know there is a philosophy of economics that conforms to what human being actually do rather than how some economist thinks we ought to behave.

Examples of economic Newspeak flourish, especially if you listen to President Obama’s economic team. My favorite example is the present conflict between consumer spending and consumer saving. Since the crash, consumers have cut back on spending and are increasing their savings. Most economists are saying this is bad for the economy; they urge us to spend, spend, spend to save the economy.

Actually, it is just the opposite: saving is the road to recovery.

It seems rather obvious that during a downturn of the economy it would be natural for people to save more and spend less. They are uncertain about their jobs, the values of their homes have plummeted (about 30% since the peak in 2006); their stocks have declined, and their debts are high. Isn’t it common sense that people are doing the rational thing by saving? This is something our parents and grandparents understood well.

Yet Keynesian economists, the dominant economic theory today, tell us that consumers should be spending rather than saving. “Don’t you realize,” they say, “that 70% of our economy is based on consumer spending. Why do you think we have all that unemployment? We won’t recover until we can get people to starting buying stuff again!” Since we aren’t spending they have got the government to do our spending for us. Paying one man to dig a hole and paying another man to fill it is, under Keynesian theory, the path to recovery.

According to their logic, we had the biggest financial bust in world history because consumers wrongfully just stopped spending. If that was the case, it’s funny we didn’t hear these guys warn us about too much consumer spending during the housing bubble.

To explain why saving is good and why economists are wrong, we have to ask why we keep having these boom-bust cycles. Here is where common sense really has been thrown out the window by mainstream economists. Almost all economists believe that you can make the economy prosper by printing huge amounts of new money and throwing it at the economy to make it grow.

Does it make sense that by printing more pieces of impressive looking green paper that you can create wealth? If that were the case, why aren’t the Zimbabweans the richest people on the planet? Yet, this is what economists believe and this is what the Fed practices.

To cut this short, this is exactly what the Fed did starting in 2001. Over a five-year period, the Fed reduced its Fed Funds rate from 6% to 1%. Money flooded the economy. Housing projects that made no sense but for the cheap money and the false appearance of paper prosperity, were hugely over produced. When the Fed stopped the gusher of money in 2006, the whole thing collapsed and pulled the economy down in the biggest bust the world has ever experienced.

Consumers, as we are referred to by economists, lost $10 trillion of wealth in the bust, and were left with huge debts from their wild spending. They borrowed against the value of their homes, they borrowed on their credit cards, and they borrowed to buy big new cars. Now about 25% of Americans have more debt on their homes than the homes are worth.

So what would you do in those circumstances? Spend more? I don’t think so. And that is why consumers are saving. Yes, it reduces consumer spending, but how else are we going to save when unemployment is high and wages are stagnant? Savers are making rational, informed choices and economists just can’t see that.

There are two major benefits from savings. You could say that reduced spending doesn’t boost the economy and it causes housing and other asset values to decline. But that ignores a critical point, and one that is hindering recovery: how else are you going to get rid of the homes and commercial real estate and that were overproduced during the fake boom? This really is simple economics: supply and demand. As prices fall, buyers will be attracted to the market, and gradually the excess disappears. The longer those assets and their related debts hang around, the longer this recession will last. This, I believe is the most critical issue in the economy right now: by letting the economy solve the problem of all these overproduced assets, credit will start flowing again.

Another critical benefit is that new savings builds up capital for future expansion. In addition to the $10 trillion lost by us consumers, the entire wealth of this country was reduced by maybe another $30 to $50 trillion (these numbers are hard to pin down). With all that capital wiped out, you may ask where the capital will come from to finance a revival of the economy once the dead wood is cleared away. We already know that it can’t be done by printing money. It can only be done by savings.

I say, “Thank you my fellow Americans for doing the right thing to help our economy recover. Please ignore the economists. Take care of yourselves and you’ll be taking care of the economy.” Good is good. Bad is bad.


Author's Disclosure: No positions

Medicines Beats on Both Top and Bottom Lines

Medicines (Nasdaq: MDCO  ) reported earnings on May 10. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Medicines beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue expanded and GAAP earnings per share dropped significantly.

Gross margins expanded, operating margins shrank, net margins shrank.

Revenue details
Medicines recorded revenue of $126.6 million. The four analysts polled by S&P Capital IQ predicted sales of $123.4 million on the same basis. GAAP reported sales were 13% higher than the prior-year quarter's $112.1 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.27. The three earnings estimates compiled by S&P Capital IQ anticipated $0.18 per share. GAAP EPS of $0.14 for Q1 were 69% lower than the prior-year quarter's $0.45 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 69.5%, 120 basis points better than the prior-year quarter. Operating margin was 9.5%, 370 basis points worse than the prior-year quarter. Net margin was 6.0%, 1,560 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $134.5 million. On the bottom line, the average EPS estimate is $0.25.

Next year's average estimate for revenue is $545.6 million. The average EPS estimate is $1.45.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 119 members out of 132 rating the stock outperform, and 13 members rating it underperform. Among 27 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 26 give Medicines a green thumbs-up, and one gives it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Medicines is outperform, with an average price target of $24.20.

Over the decades, small-cap stocks, like Medicines have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

  • Add Medicines to My Watchlist.